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The kinds of leases you should know in commercial real estate

If you're considering taking on a new commercial building or want to lease your own, you need to know the kinds of leases that are available. You'll want to know that the lease you choose is meeting your needs in the long term. Comparing your options and negotiating with the help of your attorney can help you save money and get better terms on the agreement.

Remember to always read a lease carefully; you need to know exactly what you have to pay for and when it's due if you're the renter. Sometimes, there are additional charges added into your lease, so don't forget about those when you're working through your negotiations.

There are a few kinds of leases that you may be exposed to as you look for the right one for your business. These include flat or fixed leases, gross leases, cost-of-living leases, step leases, net leases, net-net leases, net-net-net leases, and percentage leases. Each one has its own special requirements. For example, step leases increase their rent each year during the life of the agreement, which means you may start with a good rate and end up paying much more later. The changes will be made to cover increases in expenses that the landlord faces, but these increases are not based on actual costs. Instead, they're based on an estimate for growing costs related to the property.

Cost-of-living leases, on the other hand, are based on the rise in the local cost of living. Rent will therefore rise with the inflation rate in the state or country, depending on the terms of the lease.

Source: FindLaw, "Types of leases," accessed April 07, 2016

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